15-01-2013, 04:23 PM
THE KING WITHOUT FISHES
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ABSTRACT
Indian Aviation Industry is one of the fastest growing markets in the world. But nowadays it is in the news due to
different reason. And that is the failure of one of the leading aviation player - Kingfisher Airlines. The airline has
been facing financial issues for many years. Till December 2011; Kingfisher Airlines had the second largest share
in India's domestic air travel market. However due to the severe financial crisis faced by the airline, it has the fifth
largest market share currently. Even the company have no funds to pay the salaries to the employees and is facing
several other issues like fuel dues; aircraft lease rental dues, service tax dues and bank arrears. This case outlines
the financial turmoil of the Kingfisher in detail.
Keywords: Aviation industry, Kingfisher Airlines, financial turmoil, financial issues, crisis and debt restructuring
INTRODUCTION:
Kingfisher Airlines is an airline group based in India.
Its head office is The Qube in Andheri (East),
Mumbai; and Registered Office in UB City,
Bangalore. Kingfisher Airlines was established in
2003. It is owned by the Bengaluru based United
Breweries Group. Kingfisher Airlines, through its
parent company United Breweries Group, has a 50%
stake in low-cost carrier Kingfisher Red. The airline
started commercial operations in 9 May 2005 with a
fleet of four new Airbus A320-200s operating a flight
from Mumbai to Delhi. It started its international
operations on 3 September 2008 by connecting
Bengaluru with London.
The airline has been facing financial issues for many
years. Till December 2011; Kingfisher Airlines had
the second largest share in India's domestic air travel
market. However due to the severe financial crisis
faced by the airline, it has the fifth largest market
share currently, only above Go Air. Kingfisher
Airlines is one of the only seven airlines awarded 5-
star rating by Skytrax along with Cathay Pacific,
Qatar Airways, Asiana Airlines, Malaysia Airlines,
Singapore Airlines, and Hainan Airlines. Kingfisher
operates 250 daily flights with regional and long-haul
international services. In May 2009, Kingfisher
Airlines carried more than 1 million passengers,
giving it the highest market share among airlines in
India. Kingfisher also owns the Skytrax award for
India's best airline of the year 2011.
STARTING OF THE CRISES:
Ever since the airline commenced operations in 2005,
the company is reporting the losses. But the situation
became more horrible after acquiring the Air Deccan
in 2007. After acquiring the Air Deccan, the company
suffered a loss of over Rs. 1,000 crore for three
executive years. By early 2012, the airline
accumulated the losses of over Rs. 7,000 crore with
half of its fleet grounded and several members of its
staff going on strike. Following table 1 highlights
losses of the company since inception:
CRISIS TILL CONTINUE:
Debt restructuring also couldn’t change the
game. By restructuring, company had reduced the
interest charges by Rs. 500 crores every year, but due
to the high leverage condition and increase in cost,
the company started to face the liquidity problem.
The company had no funds in hand and it created the
following payment problems.
DELAYED SALARY:
Kingfisher Airline has staff strength of 6,000
and spends 58 crore on salaries a month. According
to the first quarter financial results, it has 173.66
crore under the employees cost head, which has
increased from 163.40 crore during the same
quarter last year. Kingfisher Airlines delayed salaries
of its employees in August 2011, and for four months
in succession from October 2011 to January 2012.
Kingfisher also defaulted on paying the Tax
Deducted at Source from the employee income to the
tax department.